Bluegrass Beacon: Hit drug program’s PAUSE button

BluegrassBeaconLogoEditor’s note: The Bluegrass Beacon is a weekly syndicated statewide newspaper column posted on the Bluegrass Institute website after being released to and published by newspapers statewide.

The 340B program was created by Congress in 1992 to provide life-saving medicine to poor and uninsured Americans by forcing pharmaceutical manufacturers wanting their drugs covered by Medicaid and Medicare to sell them at discounted rates of up to 50 percent to hospitals willing to serve vulnerable patients.

However, Washington has failed to provide needed oversight to ensure that facilities signing up for 340B are, in fact, serving the poor and investing reimbursed funds – per lawmakers’ intent – into charitable care.

Wealthy Duke University hospital generated 340B profits worth nearly $500 million during a recent three-year stretch though fewer than 5 percent of its patients during that period were charity cases.

Participation in 340B by some Kentucky hospitals also raises questions.

Why, for example, are drug manufacturers forced to offer these huge discounts to Norton Healthcare, which raked in $1.5 billion in revenues in 2014 yet whose charity cases comprised less than 1 percent of its patients?

The Medical Center of Bowling Green reported $285 million in revenues that same year but still participates in 340B even though its charity cases added up to less than 0.5 percent of its patients.

An industry study last year found more than a third of 340B hospitals report charity-care levels of less than 1 percent of all inpatient costs while 22 percent of participating hospitals provide 80 percent of all care received by the program’s vulnerable patients.

The Trump administration is addressing some of the misguided incentives by slashing reimbursement rates for 340B drug purchases.

Hospitals previously acquired drugs from manufacturers at up to half the cost then turned around and received reimbursement from Medicare at a rate of 6 percent above their average national sale price, pocketing the difference with the expectation being that the surplus funds would be used to serve disadvantaged patients.

However, with the evidence mounting that poor patients aren’t reaping most of those benefits, the Trump administration is cutting reimbursements rates by nearly 29 percent, placing them at nearly 23 percent below the average national sale price.

Seema Verma, administrator of the Centers for Medicare and Medicaid Services, assures these cuts will save Medicare beneficiaries, who are required to pay 20 percent of Medicare’s reimbursement rate for their medicines, $320 million in 2018 and “will better, and more appropriately, reflect the resources and acquisition costs that these hospitals incur” in obtaining 340B drugs.

Congress can bolster this effort by passing the Protecting Access for the Underserved and Safety-Net Entities (PAUSE) Act, which places a two-year moratorium on new hospitals and their outpatient locations participating in 340B.

Hospitals to this point have been incentivized to purchase existing physician-owned or community-based clinics, or open new outpatient centers primarily in wealthier areas where they can use their 340B status to purchase drugs at discounted rates, sell them at full price to patients at these off-site centers who usually carry traditional commercial insurance and pocket the difference.

An Inspector General’s review found that during one quarter in 2013, hospitals paid $737 per treatment for a 340B-covered drug to treat bladder cancer yet Medicare beneficiaries were billed $831 per treatment, 13 percent more than the drug cost. Plus, Medicare reimbursed the hospitals at the healthy rate of $3,325 per treatment. It all added up to hospitals collecting a total of $3,419 above their cost of acquiring the drug.

This loophole may be legal but must be closed.

PAUSE requires hospitals who want to continue participating in the safety-net program to report their charity-care rates and the insurance status of patients receiving 340B prescriptions.

Slashing reimbursement rates and pausing growth is the right prescription for repurposing the 340B program so that it fulfills its original mission.

In fact, such an approach wouldn’t be a bad idea to adapt as a process for reviewing all welfare programs.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Reach him at and @bipps on Twitter.

Quote of the Day

“Education commissioner: State ‘up a creek’ if charters don’t get funded”

Insider Louisville

Bluegrass Beacon: Reforming Medicaid, tweaking elections and overcoming evil

BluegrassBeaconLogoEditor’s note: The Bluegrass Beacon is a weekly syndicated statewide newspaper column posted on the Bluegrass Institute website after being released to and published by newspapers statewide.

Past expanded government programs, present evil and future gubernatorial elections highlight this first edition of “Liberty Boosters and Busters” in 2018.

Liberty Boosters: President Trump for allowing states waivers to create work requirements for able-bodied adults added to Medicaid as part of Obamacare, and Gov. Matt Bevin for ensuring Kentucky was first in line for approval.

Progressives are taking legal action, claiming such requirements weren’t part of the 1965 law creating Medicaid.

The reason they weren’t is that Medicaid was intended to serve a much-smaller group.

It was created as a safety net for those incapable of helping themselves, not able-bodied adults making up to 138 percent of the federal poverty level – nearly $21,000 for individuals and $43,000 for a family of four.

Medicaid wasn’t intended to cover those who can work or at least volunteer in their communities.

It certainly wasn’t made to serve 68 million Americans, 1.4 million of whom are Kentuckians.

Ideological opponents salivate at the opportunity to paint a picture of conservatives as hardened brutes who would rather see the poor die in the streets than receive Medicaid benefits.

But hardworking taxpayer-voters get it.

The same Kaiser Family Foundation poll that shows nearly 75 percent of the public view Medicaid favorably as a safety-net program also reports 70 percent of Americans agree with allowing states to impose work requirements on beneficiaries.

Liberty Buster: Lexington Democratic state Sen. Reggie Thomas apparently thinks 10-percent turnouts in gubernatorial elections is preferable to tweaking election law to increase voter participation.

Thomas in a floor debate of a bill giving voters the opportunity to amend Kentucky’s constitution to include elections for governor, lieutenant governor, attorney general, secretary of state, auditor, treasurer and agriculture commissioner in even-numbered years when presidential elections bring significantly higher turnout, claimed voters would be confused by the change.

“I don’t think we should confuse who is running for president … with who is going to be our governor,” Thomas said in the floor debate on the bill before it received 24-11 approval by the Kentucky Senate.

Does Thomas believe voters are incapable of understanding that while who’s elected president matters, Washington isn’t going to solve problems most affecting their daily lives, like Kentucky’s pension crisis, widening education-achievement gap or budget deficits?

Voters aren’t confused. But they and their county clerks are election-fatigued, considering Kentuckians go to the polls three out of every four years.

Or, at least a few of them do.

Barely 10 and 12 percent of eligible voters turned out in the most recent off-year primaries and fewer than one in three cast ballots in the general elections, compared with nearly 60 percent in Kentucky’s 2016 presidential tally.

Yet Thomas claims the proposed constitutional amendment “goes in the wrong direction.”

So, doubling the number of voters deciding who leads the commonwealth, saving counties millions and curing election fatigue “goes in the wrong direction”?

Now I’m confused.

Life Booster: Tracy Tubbs, whose 15-year-old niece Bailey Holt’s loving life was senselessly snuffed out in the recent shooting attack at Marshall County High School.

One of Holt’s fellow students stands accused in the attack, which killed two, injured at least 18 others and shattered countless lives in the tight-knit Benton community.

It’s tempting to make the story all about a lost young man.

But Tubbs told reporters that’s not how her niece did life.

“She would absolutely tell us all to stop all the fuss, not be angry, forgive him and pray for his mom,” Tubbs said. “She would not have an angry bone in her body. She would rather us turn our pain into something good, and that’s the best way we are going to represent her life.”

Talk about love in biblical proportions: “Do not be overcome by evil, but overcome evil with good.”

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Reach him at and @bipps on Twitter.

Bluegrass Beacon: Councils just another failed fad of KERA

BluegrassBeaconLogoEditor’s note: The Bluegrass Beacon is a weekly syndicated statewide newspaper column posted on the Bluegrass Institute website after being released to and published by newspapers statewide.

Former House Speaker Jody Richards recently announced he would not seek re-election this year.

Richards, D-Bowling Green, who went to Frankfort the year Jimmy Carter was elected president, pounded the gavel in the House for 14 years, making him the longest-serving Speaker in Kentucky’s history.

His legacy involves playing a key role as longtime House Education Committee chairman in shaping the Kentucky Education Reform Act (KERA) of 1990, which was accompanied by a $1.3 billion tax increase – the largest since Daniel Boone wandered through the Cumberland Gap and first laid eyes on what would become America’s 15th state.

Among the many fads KERA forced on schools were School Based Decision Making (SBDM) councils, which gave teachers control of their school’s most important funding, personnel and curriculum decisions.

Thankfully, the legislature stands poised to make progress toward significantly reducing SBDM authority and returning it to superintendents and elected school boards, where it belongs and will make it possible for parents and citizens to demand accountability for the way schools operate and educate.

Sen. John Schickel, R-Union, has introduced sound SDBM-reform legislation which includes returning the hiring of principals to superintendents with councils playing a more-appropriate advisory role.

It also requires councils to report their activities annually to – and align their policies with – their school boards.

It also allows board members to “overturn a decision, policy, or action of a school council” they determine to be “inconsistent with local board policy” or a “hindrance to the efficient operation of the district as a whole.”

Also, it provides a mechanism and process whereby SBDM authority can be removed from clearly failing schools.

KERA also promised that this experimental and highly controversial approach to managing schools would get parents more involved in their children’s schools, even though parents would be relegated to a minority vote on the councils.

So, how’s that working out?

An analysis of state data reveals that nearly 73 percent of Kentucky’s 1,124 schools during the 2016-17 school year had only single-digit ratios of parents compared to total student enrollment even bothering to show up to vote in SBDM elections for their council representatives.

While 15 schools did have SBDM voter-to-student ratios of at least 50 percent, such a response was by far the exception.

Nearly three out of four Kentucky schools had only single-digit ratios with 101 schools having even less than 1 percent turnout in last school year’s SBDM elections.

There are limitations to such an analysis of enrollees because it doesn’t include the total number of parents in a school since some students come from two-parent homes – both of whom can vote in SBDM elections – or have siblings enrolled in the same schools.

Still, when only about one in 10 students is likely represented in the vast majority of council elections, it’s reasonable to conclude that parent interest in SBDM activities in most Kentucky schools is sparse.

While Schickel’s bill doesn’t give parents an equal or majority vote on the councils, it does provide a process whereby parents can appeal to school-board members, who, in turn, can make their case to the state Board of Education regarding why SBDM authority should be removed from failing schools.

So, while Richards and his fellow politicians reaped the political benefits of KERA, many of its experimental fads – including the SBDM approach to governing schools – were flops and failures.

Jim Waters is president and CEO of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Reach him at and @bipps on Twitter.

Why Kentucky should not delay charter schools – Evidence from New York City schools

As I wrote yesterday, there are comments floating about that Kentucky should delay funding charter schools due to the state’s general financial pinch. But, if the goal is better education, I don’t think that is a very good idea.

Yesterday I pointed to evidence from the National Assessment of Educational Progress that charter schools do a much better job for black students in eighth grade math, a racial group and academic subject where Kentucky has particularly severe problems.

Today, we look at some evidence from the October 2017 study of New York City’s charter schools by the CREDO research group at Stanford University.

In particular, this figure from that report shows the Big Apple’s charter school students do dramatically better as they spend more years in the charter school environment.

CREDO 2017 NYC Report Figure 7 Effects by Years of Enrollment in Charters

For example, by the time a NYC charter student has spent four years in that school of choice, he is ahead by about “68 days of additional learning in reading and 97 more days in math.”

What is particularly surprising is that while reading performance is actually lower compared to the traditional schools for first-year charter students, even math performance moves ahead notably in the first year by the equivalent of about two extra months of learning. That is hard to do because students generally bring a lot of problems to charter schools and other CREDO reports generally show it takes more than one year for students to adjust to charters and better learning opportunities.

In any event, given Kentucky’s major problems with math, this new CREDO study adds more evidence that delaying charters in Kentucky is really just denying students an opportunity to get a better education.

Why Kentucky should not delay charter schools

We are hearing a lot lately from some quarters that Kentucky needs to delay funding charter schools.

I think that is a mistake, especially for the kids who could benefit, and recent test results from the National Assessment of Educational Progress (NAEP) Trial Urban District Assessment (TUDA) in eighth grade math backs me up.

I focused on eighth grade math because this is Kentucky’s real Achilles’ heel in NAEP. We score lowest on this NAEP area by far. And, results are far worse still for the state’s black students.

Unfortunately, the NAEP TUDA doesn’t provide really good research information for charter school evaluation. The 2015 TUDA generally didn’t sample enough charter school students to develop credible scores for racial minorities. Also, due to the small student samples, even when NAEP did report scores for minorities in charter schools, the sampling errors were quite large, so it takes a big score difference to show a statistically significant difference.

Despite this, three city school systems that took NAEP Grade 8 Math TUDA in 2015 had enough black students tested to report scores for both those in charter schools and in schools that are not charters. The table, which I developed using the new NAEP Data Explorer, tells the tale.

Atlanta - Baltimore City - Chicago G8 NAEP TUDA Math for charters and not Charters 2015

As you can see, blacks in both Atlanta’s and Chicago’s charter schools outscored blacks in the not charter schools in both cities by a statistically significant amount.

Blacks in Baltimore City charters also appear to outperform, but the sampling error is so large that even the 8-point difference in scores is not large enough to be statistically significant.

An 8-point difference on NAEP is actually a fairly notable difference, by the way. If we look at white scores for Grade 8 Math for all the states in 2015, if Kentucky’s NAEP scale score were raised by 8 points, its relative ranking would increase from 47th place to 32nd place. That is a notable change!

There is another interesting thing with these NAEP examples. The NAEP TUDA doesn’t consider how long a student has been in a charter school. Kids in their first year get tested as part of the sample. That works against charters getting a fair evaluation because, as we have discussed before, research from multiple sources shows students generally need to spend more than just one year in charters for the benefits to show. Thus, NAEP’s sampling process actually creates a bias against accurate portrayal of true charter school performance.

Still, even though the NAEP really isn’t a very precise and accurate tool for charter school research, the available data for 2015 for large cities indicates that where data is available, it looks like charters are getting the job done for black students.

And, that’s why continuing to delay implementing charters in Kentucky just isn’t the right thing to do if you really care about students.

How is Kentucky’s education system really performing?

Kentuckians hear it all the time. The state supposedly has made dramatic improvement on things like “National Tests” since KERA began. For example, the Prichard Committee proclaims that Kentucky ranks “8th in fourth-grade reading,” which is actually where the state ranks if you only look at overall 2015 scores for fourth grade reading from the National Assessment of Educational Progress (NAEP). A Prichard representative made similar claims on the February 5, 2018 Kentucky Tonight show.

But, is this an accurate picture? As the late Paul Harvey used to put it, there is a “Rest of the Story” here, and the rest of Kentucky’s education performance picture is important.

Want to see “Page 2” in this story? Just click the “Read more” link.

[Read more…]

Prescription reimbursement policies: Use scalpels, not sledgehammers

Each legislative session brings its own attempts – usually born out of frustration – to address real problems in ways that just wind up growing government’s size, scope and cost.

It’s indicative of sledgehammer-to-ant syndrome. Rather than kill ants and address the specific problem, this approach knocks down the entire house.

Obamacare an example

Perhaps no large-scale policy change in America better describes such an approach than the so-called Patient Protection and Affordable Care Act, which provided neither protection nor more affordable coverage or care for patients.

It’s not that there weren’t some problems that needed attention. Rather, the solutions Obamacare offered went way beyond the pest control needed to address the ants on the floor and instead tore the whole house down.

Obamacare not only didn’t fix the health care and coverage problems but exacerbated them. It’s as if it knocked our whole health-care house down only to discover the ants survived the demolition and grew in number.

[Read more…]

Surprise! Kentucky’s average teacher salary ranks a lot higher than you probably thought

It was probably a surprise statement for many during last night’s Kentucky Tonight show on KET, which included Bluegrass Institute president and CEO Jim Waters.

At 37 minutes and 40 seconds into the online version of the show, Brigit Ramsey, who now heads the Prichard Committee for Academic Excellence, stated that Kentucky’s teacher salaries now rank 26th in the nation among the 50 states. That’s right – right in the middle of the pack.

Because there will be a lot of disbelievers, we checked this one out. We pulled up the National Education Association’s (NEA) latest edition of their annual statistical bible, the “Rankings & Estimates, Rankings of the States 2016 and Estimates of School Statistics 2017” report. We cruised to Table I-12 in that document, which covers “AVERAGE SALARY OF TEACHERS AND INSTRUCTIONAL STAFF ($) (2017).” We even found a nifty hot link in the PDF report that allowed us to download an Excel spreadsheet with the entire set of tables from Section I. That made it super easy to rank the column holding the “All Teachers” salary information.

Sure enough, the Ramsey surprise was confirmed. According to the NEA itself, Kentucky’s 2017 teacher salaries rank right at the median – in 26th place – among the 50 states.

You sure haven’t been hearing that from Kentucky educators who are complaining they need more money.

By the way, I also took a look at the 2016 median household income in all 50 states as tabulated in the US Census Bureau’s web site. Kentucky only ranks just four places up from the bottom of the 50 states for its median household income level.

Got that: Kentucky’s teacher income ranks 26th, Kentucky’s taxpayer ability to fund that only ranks 47th.

So, while the Kentucky taxpayer is paying teachers at a level that ranks right in the middle of the nation, the taxpayers’ ability to do that is being very sorely strained.

Now, how is that again about raising taxes even more so our teachers can grab even more from our state’s very financially strained families? Could there be a gratitude problem here let alone a lack of touch with reality? Or, do teachers think tax dollars come out of thin air?

A state secret or a secret from the state: technology as an obstacle to the public’s right to know

COG LOGOEvents have rapidly unfolded since we first commented on a serious threat to open government in the state of Missouri. The threat is a notable one for Kentuckians because it could play out in our own backyard.

The Kansas City Star reported on December 7 that  Missouri’s governor – and his staff – had downloaded the app Confide to their personal cellphones. The app “deletes messages and prevents recipients from saving, forwarding, printing or taking screenshots of messages.” The app was likened to the Mission Impossible tape recorder that instantly burst into flames after delivering instructions to the agents during the opening of the sixties’ television series.

Within days of the report, there were calls for an investigation by the Missouri attorney general into possible violations of the state’s sunshine law and records management laws.

Subsequent  requests to the Missouri governor for records relating to the use of Confide in his office met with delay and evasion. When at last the governor’s office responded, his staff indirectly acknowledged use of the app but denied a request for documents showing the date on which the governor or his staff downloaded it or a similar app.

In support, the Missouri governor cited that state’s equivalent of Kentucky’s open records homeland security exception, prompting critics to declare that the requested information – namely, the date or dates on which the app was installed — “is not a state secret, [i]t’s a secret from the state.”

Under either states’ law, and on these facts, the invocation of statutes aimed a thwarting terrorism to support nondisclosure strains credulity.

The issue is now in the courts in a case alleging violation of the Missouri sunshine law.

Opponents of the governor’s use of Confide argue that the “use of automatic communications destroying software by elected officials and government employees is illegal and constitutes an ongoing conspiracy to violate” the state sunshine and records management laws, “not to mention a significant affront to the open government and democratic traditions of Missouri and the United States.”

Meanwhile, criticism has emerged concerning the governor’s use of his “personal” Facebook and Twitter accounts  to, for example, conduct a meeting from his office in the Capitol to discuss his tax cut plan with constituents.

In an about-face, the Missouri attorney general determined that the practice does not violate the state’s Sunshine Law absent evidence indicating that the account is being used to transact public business. This begs the question: just how narrowly does the attorney general define the term “public business?”

To his credit,  the Missouri attorney general has proposed changes to the state’s laws aimed at, among other things, assigning penalties for violation of records management and retention laws of up to a year in prison, up to a $2,000 fine or both.

His efforts coincide with a bill introduced in the current Missouri legislative session that prohibits the use of software like Confide that is designed to automatically delete messages and a bill that amends the definition of public record to include social media pages so that the information contained in such pages is subject to sunshine law requests and clarifies that electronic mail, text messaging, direct or private messaging through social media accounts or other applications or platforms are, under certain circumstances, public records and must be preserved for the purpose of sunshine law requests.

Why focus on threats to the public’s right to know in Missouri under that state’s sunshine law?

It is because the same threats confront Kentucky under our open records and records management laws.

These laws were last substantially amended in 1994. In that year, the General Assembly recognized “an essential relationship between the intent of [Chapter 61 of the Kentucky Revised Statutes, dealing with  open records] and [Chapter 171] dealing with the management of public records, . . .  and that to ensure the efficient administration of government and to provide accountability of government activities, public agencies are required to manage and maintain their records according to the requirements of these statutes.”

The Kentucky Department for Libraries and Archives – which is responsible for implementing Chapter 171 by establishing retention schedules for records of all public agencies — has been proactive in capturing all records in the schedules, based on content rather than format or location, declaring that public officials and employees “are responsible for maintaining the integrity of records whether those records are stored electronically or in hard copy. Information must be accessible to the appropriate parties until all of the legal, fiscal, and administrative retention periods have been met, regardless of the medium.”

The Kentucky Attorney General has been anything but proactive, issuing open records decision in 2015 and again in 2016 ill-advisedly declaring that communications between public officials and employees concerning public business conducted on private devices are not public records.

In so doing, the Attorney General  “ignored the expansive definition of the term ‘public record’ and years of precedent that had guided the office’s interpretation of the law recognizing that  ‘[i]n the end, it is the nature and purpose of the document, not the place where it is kept, that determines its status as a public record.’” An analysis of those open records decision can be found here.

Given the dated language of our Open Records Law, and the Kentucky attorney general’s past failure to effectively apply the law to emerging technologies or to seize the initiative in proposing legislation to address the widening gap between technology and the law, Kentucky will soon – if it does not already — face similar challenges to those now confronting Missouri.

Unless the Attorney General is prepared to reverse his position on this and similar issues, or an appellate court points out the error in his analysis, legislative action — such as that proposed in the Bluegrass Institute’s report, “Shining the Light on Kentucky’s Sunshine Laws” — represents the best, and perhaps the only, solution.

–Amye Bensenhaver is director of the Bluegrass Institute Center for Open Government.